Analysis of U.S. EIA data: U.S. crude inventory overhang continues to erode
New York - May 28, 2009
U.S. crude stocks dropped a larger-than- expected 5.413 million barrels to 363.111 million barrels last week as refiners ramped up run rates at the same time imports failed to appreciably increase, an analysis of the weekly oil data from the U.S. Energy Information Administration (EIA) showed Thursday.
Analysts polled by Platts had expected a build of 1.8 million barrels in the week ended May 22.
At 363.111 million barrels, U.S. crude stocks were 36.15 million barrels more than the five-year average and 51.552 million barrels greater than year-ago levels.
Over the past four weeks, U.S. crude stocks have declined a cumulative 12.147 million barrels. Crude inputs to refineries climbed 624,000 barrels per day (b/d) to 14.733 million barrels with more than 50% of the increase occurring along the Gulf Coast. While inputs to refineries soared as facilities exited maintenance operations, imports remained well below the 9 million b/d level, a level that will likely cause stocks to continue to drop if maintained.
Crude imports edged down 13,000 b/d to 8.778 million b/d, but with the front of the New York Mercantile Exchange (NYMEX) crude oil futures curve narrowing to well under $1 per barrel (/barrel), the economic incentive is now to draw inventory. The curve is a comparison of the price of the current-month futures contract with subsequent- and later-month contracts.
The jump in runs along the Gulf Coast caused stocks in that region to fall 4.2 million barrels to 186.1 million barrels. But crude stocks at the NYMEX futures contract delivery point in Cushing, Oklahoma jumped 1.1 million barrels to 30.684 million barrels, the highest level in two months.
And the jump in refinery runs allowed refiners to push gasoline production up by 643,000 b/d to 9.378 million b/d, a nine-month high. Given the $12/barrel premium the NYMEX RBOB crack spread held in relation to the heating oil crack spread, the increase in gasoline and dip in distillate output was logical. The crack spread is the price difference between the barrel of raw crude compared to the refined products the barrel can produce. Distillate output dipped 96,000 b/d to 4.036 million b/d.
Meanwhile, the jump in week-over-week implied demand warranted a higher level of gasoline imports to prevent a stock drawdown. Implied demand is the amount of product that moves through the US distribution system, not actual end consumption. Gasoline stocks fell a less-than-expected 537,000 barrels to 203.417 million barrels. At 203.417 million barrels, gasoline stocks were 3.479 million barrels below the five-year average and 2.738 million barrels below year-ago levels.
Implied gasoline demand rose 306,000 b/d to 9.538 million b/d, the highest level since August 2007. On a four-week moving average, gasoline demand at 9.151 million b/d was just 40,000 b/d below year-ago levels, or 0.4% below the same time one year ago. In the prior week’s report, gasoline demand was 1.2% below year-ago levels. But an increase in gasoline demand ahead of the Memorial Day weekend was in line with historical norms and generally will continue to uptick or hold steady through August, given this week's rather large reading.
While crude and gasoline stocks continued on a tightening trend, distillate builds finally showed signs of slowing. Middle distillate stocks increased just 248,000 barrels to 148.4 million barrels. At 148.4 million barrels, middle distillate stocks were 35.606 million barrels above the five-year average and 38.944 million barrels above year-ago levels.